Prime Minister John Key says Oravida's scampi is "tasty" but the company's use of his photo in advertising does not constitute an endorsement of the product and does not breach any rules.
Oravida, which is owned by Stone Shi, a substantial National Party donor and close personal friend to Justice Minister Judith Collins, is using a picture of Mr Key in an ad in a Chinese magazine.
Ms Collins recently faced claims of a conflict of interest after it emerged she visited Oravida's Shanghai offices and also had dinner in Beijing with Mr Shi and a senior Chinese border control official during an official visit last year.
This morning, Mr Key said he believed he had eaten Oravida's scampi during his own recent visit to China.
"It was probably Oravida's scampi that the (NZ) ambassador served us when we were in China... it was tasty."
However, advice received by his office on Oravida's use of his picture in its advertising was, "it wasn't promoting or endorsing the product".
"It was in an ad, companies from time to time do do that, if it breaches the rules we tell them to stop doing that."
Mr Key's picture appeared in the corner of a full page ad for Oravida's scampi and was spotted on the back cover of an in-flight magazine by a New Zealand businessman on a domestic Chinese flight.
A spokeswoman for Mr Key said that if the attached picture had the Prime Minister holding a scampi and the text said, 'PM John Key says Oravida's scampi is great, and you should buy it', then that would be a breach."
The company has previously used on its website a picture of Mr Key playing golf with Mr Shi.
Ms Collins whose husband, David Wong Tung, is on Oravida's board, was also snapped visiting Oravida's Shanghai offices during her ministerial visit to China last year and her picture was used on the company's website.
Labour MP Grant Robertson said: "The bottom line is they're not supposed to do this and they've already been told not to do it.
"What it speaks of is an unhealthily close relationship between Oravida and the National Party."
Despite being caught out using pictures of Mr Key and Ms Collins in the past, Oravida kept doing it, "because they keep being encouraged by the National Party - they're continually in situations where they are given access to ministers".